Federal analysis outlines how extra EI benefit program topped $1.92 billion

A Liberal program to give extra employment insurance benefits to workers in regions hit hard by a drop in natural resource prices will end up costing almost $2 billion _ more than double original estimates.

The government budgeted $827.4 million for the extra payments.

The latest department estimates show the measure will end up costing $1.92 billion, largely the result of changes that allowed more workers to receive extra payments and unemployment rates that stayed higher for longer than the government anticipated.

Further details will come out later this year when the government releases its annual report on the EI system.

The extended benefit program rolled out in 2016 for workers in 12 regions that had seen a sharp and sustained drop in employment as a result of a downturn in energy prices.

Most workers were given an extra five weeks of benefits, while long-tenured workers received an extra 20 weeks.

By July, weekly data revealed that payments had exceeded $1.3 billion and department officials warned Social Development Minister Jean-Yves Duclos in a preliminary assessment that costs were likely to top $1.9 billion.

The assessment obtained by The Canadian Press under the Access to Information Act says costs went up due to the addition of three regions to the program and making payments retroactive to January 2015, which gave workers who had already exhausted benefits an extra couple of weeks of payments.

This was particularly true for long-tenured workers. The department says these workers account for $1.7 billion in payments, despite being only 28 per cent of all recipients of the extra benefits.

The assessment noted about one-quarter of EI claimants usually use up benefits before going back to work, but almost half of workers exhausted their benefits under the Liberal program.

Employment and Social Development Canada said the unemployment rates in those regions also stayed higher for longer than officials expected, increasing “the number of claims and their likelihood of taking advantage of the EI extended benefits.”

The combined result of policy decisions and economic conditions was that 412,000 people qualified for extra benefits, instead of the 235,000 federal officials originally estimated would use the program.

“They failed to estimate just how hard it was going to be for people to get work,” said Frances Woolley, an economics professor at Carleton University in Ottawa.

“I’m kind of surprised that mistake was made.”

Parisa Mahboubi, a senior policy analyst from the C.D. Howe Institute, said extended high unemployment rates would have made it difficult for workers to find jobs, leaving them to stay on the program longer than anticipated.

She said the extended benefits could have also reduced incentives for workers to find new employment.

Woolley said the policy itself appears to have been helpful for workers in need, even though it went well over budget.

Bank of Canada hikes interest rate to 1.25%, cites strong economic data

By Andy Blatchford

THE CANADIAN PRESS

OTTAWA _ The economy’s impressive run prompted the Bank of Canada to raise its trend-setting interest rate Wednesday for the third time since last summer but looking ahead it warned of growing uncertainties about NAFTA.

The central bank pointed to unexpectedly solid economic numbers as key drivers behind its decision to hike the rate to 1.25 per cent, up from one per cent. The increase followed hikes in July and September.

While the central bank signalled more rate increases are likely over time, it noted the unknowns surrounding the future of the North American Free Trade Agreement and the potential negatives for Canada were casting a widening shadow over its outlook.

The bank said ‘some continued monetary policy accommodation will likely be needed” to keep the economy operating close to its full potential.

Governing council, it added, would remain cautious when considering future hikes by assessing incoming data such as the economy’s sensitivity to the higher borrowing rates.

For the move Wednesday, the bank couldn’t ignore the 2017 data, even as it acknowledged the risks about NAFTA’s renegotiation.

“Recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity,” the bank said in a statement.

“Consumption and residential investment have been stronger than anticipated, reflecting strong employment growth. Business investment has been increasing at a solid pace, and investment intentions remain positive.”

Moving forward, the bank predicted household spending and investment to gradually contribute less to economic growth, given the higher interest rates and stricter mortgage rules. It predicted Canada’s high levels of household debt would amplify the effects of higher interest rates on consumption.

The rate increase by the Bank of Canada is expected to prompt Canada’s large banks to raise their prime lending rates, a move that will drive up the cost of variable-rate mortgages and other variable-interest rate loans.

Exports have been weaker than anticipated, but are still expected to contribute a larger share of Canada’s growth, the bank said. It also noted that government infrastructure spending has helped lift economic activity.

The Bank of Canada said the unknowns of the NAFTA’s renegotiation are continuing to weigh on its forecast and have created a drag on investment and exports.

“Today’s rate hike was a rear-view mirror move, but the Bank of Canada hints that the view out the front window isn’t quite as sunny,” CIBC chief economist Avery Shenfeld wrote in a research note to clients after the rate announcement.

“We share the Bank of Canada’s view that higher rates will be needed over time. But perhaps not as fast and furious as the market was starting to think. The bank’s statement put NAFTA uncertainties right up front.”

The Bank of Canada warned that lower corporate taxes in the U.S. could encourage firms to redirect some of their business investments south of the border. On the other hand, it predicted that Canada will see a small benefit from the recent U.S. tax changes thanks to increased demand.

The bank also released new economic projections Wednesday in its latest monetary policy report.

For 2017, it’s now predicting three per cent growth, as measured by real gross domestic product, compared with its 3.1 per cent prediction in October.

The bank slightly increased its predictions for 2018, up to 2.2 per cent from 2.1 per cent. It expects the economy to expand by 1.6 per cent in 2019, up from its previous call of 1.5 per cent.

The fourth quarter of 2017 and the first quarter of 2018 are each expected to see annualized growth of 2.5 per cent.

Governor Stephen Poloz raised rates in July and September in response to a surprisingly strong economic run that began in late 2016. The hikes took back the two rate cuts he introduced in 2015 to help cushion, and stimulate, the economy from the collapse in oil prices.

Up until a couple of weeks ago, many forecasters still had doubts that Poloz would raise the rate Wednesday. However, two strong reports _ the December jobs data and the bank’s business outlook survey led many experts to change their calls.

Heading into the decision Wednesday, Scotiabank Economics forecasted three hikes totalling 75 basis points throughout 2018 and three more in 2019. TD Economics expected a gradual pace of tightening over the next two years of about 25 basis points every six months.

B.C. sets minimum age of 19 to consume marijuana, plans mix of retail sales

British Columbia has become the latest province to lay out its plan for regulating recreational marijuana, announcing that pot sales will be allowed through both public and private stores to buyers who are at least 19 years old.

B.C. is following other provinces in keeping the age of consumption, purchase and possession of marijuana consistent with alcohol and tobacco laws, which Solicitor General Mike Farnworth said Tuesday will more effectively protect young people and eliminate the black market.

“We know that the largest consumers of cannabis are young people,” Farnworth said when asked about evidence from health experts on the danger of cannabis on the developing brains of people older than 19.

“If you set it too high, for example at 25, you’re not going to get rid of the black market because they’re going to go and get it elsewhere.”

The federal government intends to legalize non-medical cannabis in July. B.C.’s announcement follows a public consultation period that received submissions from nearly 50,000 residents and 141 local and Indigenous governments.

The B.C. Liberals pressed the government to act quickly on the questions that remain about how pot will be sold and where.

“This should not be seen as a profit centre for government and any extra revenue should be redirected to enforcement and addiction services,” Liberal legislature member Mike Morris said in a statement,

Farnworth released few details about retail sales, beyond saying both public and private vendors will be allowed. He was unable to comment on online sales or whether current marijuana dispensaries would be able to apply for licences to continue operating after legalization.

The government expects to release details of its retail model towards the end January or the beginning of February, he said.

Work also remains to be done on whether people will be allowed to grow plants at home for personal use, a practice that has been banned by Manitoba over concerns about enforcement. Manitoba also released its plans for overseeing marijuana sales on Tuesday.

B.C.’s public consultation produced a report that was released alongside its announcement Tuesday. It revealed polarized views on drug-impaired driving, showing that some want zero tolerance while others said cannabis doesn’t impact the ability to drive.

The report also says there was some confusion among consultation participants on the distribution and retails sales of marijuana, but many opposed Ontario’s model. Ontario intends to sell the drug in up to 150 stores run by the Liquor Control Board of Ontario and ban consumption in public spaces or workplaces.

“Most of these individuals preferred to see the existing dispensaries and their supply chain legitimized, licensed and regulated,” the report says.

It also says two points emerged on public consumption: People don’t want to be subjected to second-hand smoke in public places and they want cannabis consumption limited to indoor use at a private residence or a designated space.

 

47% decrease in mortgage loan insurance business ‘new normal’: CMHC

Canada’s national housing agency said Wednesday that the 47 per cent decline in the country’s insured mortgage market year-over-year in the third quarter is the “new normal level.”

The Canada Mortgage and Housing Corp. said in its latest financial report that it provided mortgage loan insurance to 67,915 units for the three-month period ended Sept. 30 compared to 127,991 units during the same period a year ago.

Steve Mennill, CMHC’s senior vice-president of insurance, said decreased volumes have been steady throughout the year as a result of the new mortgage rules announced by the federal government in the fourth quarter of 2016.

The rules require all home buyers with less than a 20 per cent down payment to undergo a stress test to ensure the borrower can still service their loan should interest rates rise, or their personal finances fall. This cut into the purchasing power of some first-time homebuyers.

“We think we’ve found the new kind of level following those changes that were made close to a year ago,” Mennill said during a conference call Wednesday, November 29, 2017.

“So we’re fairly confident that the level of volume that we’re seeing now is the new normal level.”

CMHC said the 47 per cent drop in total insured volumes in the third quarter was primarily due to decreases in transactional homeowner and portfolio volumes. The agency reported that transactional homeowner volumes decreased by 13,966 units, or 30 per cent, due to lower purchase and refinance volumes, while portfolio volumes decreased by 50,388 units, or 90 per cent, mainly due to the market adjusting to new pricing as a result of the increased capital requirements.

Partially offsetting those decreases was an increase in multi-unit residential volumes of 4,278 units, or 17 per cent, primarily due to an increase in multi-unit residential refinance transactions mainly resulting from a continued low interest rate environment.

In the first three quarters of 2017, total insured mortgage volumes were 211,891 compared to 345,716 in the third quarter last year.

As a result of the lower volumes, CMHC said its total insurance-in-force decreased to $484 billion as of Sept. 30 of this year, a decrease of $28 billion from the end of 2016.

Mennill said during the conference call that lower mortgage loan volumes have impacted staffing requirements within CMHC’s homeowner underwriting group but that increased volumes in multi-unit residential have offset these impacts.

Charlie MacArthur, CMHC’s senior vice-president of regional operations and assisted housing, added that the National Housing Strategy will also require homeowner underwriters at the agency to work in assisted housing.

“There will be similar skills required in the assisted housing side of the business as that business grows with the announcement of the National Housing Strategy,” he said.

Prime Minister Justin Trudeau unveiled the $40-billion plan on Nov. 22, which includes a promise to introduce legislation to make housing a fundamental right. He also promised a new, portable housing benefit for low-income households, and to prioritize funding for the most vulnerable populations like women fleeing domestic violence.

CMHC said that Budget 2017 proposes new federal investments in excess of $11.2 billion over 11 years, as well as preservation of funding for social housing and new low-cost loans to support affordable housing under the new plan. The agency said these figures will build on additional federal funding of $5 billion made available through Budget 2016, a portion of which is reflected in CMHC’s 2017 expenditures for housing programs. CMHC said it will deliver $9.1 billion of this incremental federal funding investment.

In its quarterly report the agency also said that it has seen an improvement in the quality of its mortgage loan insurance portfolio compared to a year ago.

The agency said its overall arrears rate was 0.30 per cent in the third quarter, which is down from 0.32 per cent a year ago.

 

Older Canadians forgoing retirement, working through golden years: census

The three months of Bill VanGorder’s retirement were among the longest of his career.

Lured by the promise of relaxation and spare time, the Halifax resident thought he’d relish the opportunity to walk away from an executive position and enjoy the fruits of his labour. But restlessness and a desire to keep contributing drove him back to the job market within weeks, and he was ensconced in a different corporate office three months after relinquishing his old one.

In the four years that followed, a global economic crisis ate into VanGorder’s retirement savings, making the prospect of ongoing work both attractive and inevitable.

Eventually, he decided to go into business for himself, allowing the flexibility of both a stable work life and the perks of retirement _ making VanGorder, 74, a prototype of the new brand of retiree.

The latest census data from Statistics Canada show more and more Canadians are choosing to eschew the traditional retirement age, whether for their health, their finances or just for the fun of it.

More than 53 per cent of Canadian men aged 65 were working in some form in 2015, including 22.9 per cent who worked full-time throughout the year, compared with 37.8 and 15.5 per cent, respectively, in 1995, the census numbers show.

At the age of 70, nearly three in 10 men did some sort of work in 2015, twice the proportion of 20 years earlier. Full-time work was at 8.8 per cent, up from 5.4 per cent in 1995.

The shift is even more dramatic for women, a reflection of their escalating role in the workforce. Some 38.8 per cent of senior women worked in 2015, twice the proportion of 1995, while the percentage of women working at 70 more than doubled over the same 20-year period.

The numbers show it’s high time for governments and businesses to re-evaluate the way they view Canada’s senior citizens, VanGorder said.

“One of the great problems we have … is the myth that because our population is older than the rest of the country, that’s a terrible thing and we’re a terrible draw on resources,” he said in an interview.

“What we have is a large group of seniors who are very productive, who want to contribute to the economy, who are able to offer mentorship and leadership to younger people.”

Experts agree that the large pool of baby boomers deferring retirement beyond the traditional age of 65 represent a formidable cohort for governments and employers to contend with.

Demographer David Foot said their impact is not as noticeable as it was when they first began to enter the workforce decades ago, since their ranks have slowly been thinned by health problems and even death. But mounting financial pressures and increasing life expectancy are forcing those that remain to work longer than previous generations.

The average person’s lifespan has increased two years per decade for the past 50 years, said Foot, author of the best-selling “Boom, Bust and Echo,” which anticipated the impact of the aging baby boom.

“It’s stretching out our work life so we’re no longer thinking of retiring in our early 60s any more, and it’s stretching out retirement,” he said. “Many people now have the opportunity to look forward to 20, possibly even longer, years of reasonably healthy retirement.”

That prospect, Foot said, puts a strain on people’s financial resources, particularly in an age when guaranteed pensions are no longer reliable sources of income.

Foot said the current crop of retirees are more likely to have a stable, defined-benefit pension plan, unlike future generations forced to make do with a defined-contribution plan _ if any.

As a result, Foot suggested most working seniors will only defer their retirements by up to five years, and are likely to prefer part-time work _ a trend already borne out by Wednesday’s numbers.

Despite its advantages, however, the aging workforce has yet to be embraced by private enterprise, said Canadian Labour Congress senior economist Angella MacEwen.

While retail operations may have part-time work to offer its aging employees, she said companies with seniors in white-collar jobs need to rethink their approach.

“We haven’t had a discussion about retaining, maybe transitioning people into roles of mentorship, having them work part-time, flexible hours,” MacEwen said.

“They have a lot of valuable skills to contribute, so it would be useful to maintain them in some capacity. But in a lot of cases it’s still a choice between full-time or nothing.”

MacEwen said efforts to accommodate older employees would have benefits for younger staff too, dismissing the notion that the prolonged presence of seniors would pose professional barriers for those hoping to rise through the ranks.

Employing older people allows them to keep participating in the economy, she said, creating more jobs that can ultimately be filled by people of all ages.

VanGorder, meanwhile, wants to see governments focus on providing training opportunities for the types of seniors who are rapidly becoming the norm.

“Some of us older business people have been brought kicking and screaming into the digital age because our businesses depend on (it),” he said.

“Older workers need that kind of retraining, they want it, and they can’t get it.”

 

Why are gas prices in Canada suddenly so damned high?

Excerpted article was written by

Tristin Hopper | National Post

All of a sudden, Canadian gas prices are reaching heights not seen since the release of Sharknado. Even in a cheap fuel haven like Alberta, prices are peaking as high as $1.26 per litre in Edmonton and $1.28 in Calgary. In B.C., the average price is an incredible $1.38 per litre, breaking $1.40 in Vancouver.

So, the National Post called up Dan McTeague with GasBuddy.com and a semi-obsessive expert on all things petroleum. Below, the surprisingly complex backstory to why your Honda just got way more expensive to run.

Blame it all on a production slowdown in the U.S.
Despite our oceans of oil in Alberta and Newfoundland and Labrador, Canada still gets much of its gasoline from U.S. refineries. ExxonMobil just slowed operations at its Joliet, Ill., refinery to carry out some seasonal maintenance. Same deal at a BP refinery in Whiting, Ind. Then a Texas-to-Oklahoma fuel pipeline sprung a leak, necessitating a temporary shutdown. All of these events barely merited a mention in the news, but they’re collectively costing consumers millions in pricier gas. Much of the Canadian gasoline market is subject to the Chicago wholesale price for gasoline. At the beginning of October, it was $0.56 CDN per litre. Now, it’s shot up to $0.65 CDN. And, of course, the end cost is significantly higher for Canadian drivers once taxes, transport costs and profit are all tacked on.

The Americans have been particularly thirsty for gasoline lately
A leaky pipeline and some routine maintenance are “relatively mundane factors,” as GasBuddy noted in a blog, but they’ve been helping to spike prices for the simple reason that Americans suddenly need a lot more gas. U.S. consumers are demanding 257,000 more barrels of gasoline, per day, than this time last year. The country’s economic growth is at three per cent and unemployment is continuing the plunge it began in 2010. It all makes for more cars and trucks on the road, and greater stress on the U.S. fuel supply. This time last year, the U.S. Midwest had 49.5 million barrels of gasoline on hand. Now, it’s down to 45.5 million barrels. “This is the lowest we’ve been in a very, very, very long time,” said McTeague. The result is that the U.S. is similarly getting hammered by higher gas prices, although not nearly as badly as in Canada. Right now, California is home to the highest gas prices in the United States. Still, if Leonardo DiCaprio knows where to look, he can fuel up his Range Rover for the equivalent of 91 cents CDN per litre.

Canadian dollars can’t buy as much gas
One month ago, a Canadian dollar bought as much as 80 cents of a U.S. dollar. By the beginning of November, that was down to as low as 77 cents. Naturally, a devalued currency means it costs Canada just a bit extra to bring all of its gas and diesel over the border. Although, according to McTeague, the absolute maximum effect this would have at the pump would be to raise prices by four cents; a fraction of the 16 cents on average that Canadian prices have risen since early October.

Unfortunately, things probably won’t be getting any better
U.S. production will eventually catch up. That ruptured pipeline mentioned earlier is already fixed, and major refineries will soon wrap up their seasonal maintenance. However, this is all happening just in time for consumers to get hammered with the effects of higher global prices on crude oil. Demand everywhere is on the upswing, and it doesn’t help that Saudi Arabia is currently threatening war with both Lebanon and Yemen. On Halloween night, a barrel of West Texas Intermediate crude went for $54 USD ($69.02 CDN). As of press time it’s at $57.24 USD ($73.16 CDN).

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